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Your Business

News/Business. A focus on issues facing small business in the United States.

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Kathleen 11, Jeremy 5, Brooklyn 4, Steven 4, New York City 3, Ios 3, South Hampton 3, New York 2, Sandy 2, Lance 2, Facebook 1, Apple Alumni 1, Buttery 1, Blog 1, Powerpoint 1, An American Express 1, Officemax 1, Virginia 1, Boston 1, Herrera 1,
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  MSNBC    Your Business    News/Business. A focus on issues  
   facing small business in the United States.  

    January 27, 2013
    4:30 - 5:00am PST  

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>> she shared her cookies with business partners and then the partnership crumbled. how she bounced back after losing her company and brand. three college friends who formed a successful partnership are climbing the ladder of success. and neighbors hit hard by hurricane sandy.
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hi there, everybody. i'm j.j. ramburg, welcome to "your business." this brand probably looks familiar to you but you'll never believe the ups and downs the entrepreneur behind these cookies went through after entering into a terrible partnership. tate's bake shop is known for these thin, buttery, crisp
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chocolate chip cookie. her who sale factory on the east end of long island turns out more than 2 million cookie as week that are distributed throughout nationwide. i want amounts to $10 million a year. >> the cookie has to be crisp. >> but tate's is second bakery business. her first company kathleen's bake shop was an institution in tony south hampton, new york for 18 years until she made a bad business decision to form a partnership with a former employee and his brother. that mistake cost sue herrera name, her brand, and her first thriving bakery business. >> they destroyed everything i ever had from cat liens bake shop. everything. >> baking since she was a child, kathleen started selling cookies at her family's roadside farm stand. >> i grew up here on south hampton and started baking cookies when i was 11 years old.
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my dad told me i was old enough to buy my own clothes and bake my own cookies and sell them at the farm stand. we didn't come from money so anything you wanted you had to buy or save for. >> kathleen's bake shop was a success from the start with a slew of celebrity regular, great press and a wholesale business that was growing steadily in the new york met introduce poll tan area. she bought a building in south hampton. worked crazy hours baking and taking care of all the finances, marketing and everything else in her business. >> when i was 40, i was now in the business 20 years, i was getting tired and i would like some kind of, like, a little bit less commitment and less stress. >> she had generous off towers buy the business on the table but she always promised an accountant work forge her that she would give him the chance to buy the company first should she ever decide to sell. he jumped at the opportunity.
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but insisted his brother join the deal. that sense of fairness set her up for a devastating fall. >> the business deal i made was crazy naive. i didn't have the best lawyer, obviously. and the deal was one-third, one-third, one-third. in my brain, we're all equal. but together they were two thirds. >> as soon as the deal was done the brothers started to make major changes diminishing the quality of the ingredients, moving the wholesale bakery to virginia, and hurting kathleen's reputation. >> before i signed i had some kind of instinct. but we had gone so far. i gave my word. i felt it wasn't right to back out at the last minute. >> a long time employee who was with kathleen when she launched her business witnessed the dramatic changes firsthand. >> i know her standards. and they weren't the quality that they had was not her
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standards. >> they continued to kill the quality of the brand, and it was heartbreaking. it was embarrassing because my name was on it and then ultimately after about six months then they came and fired me. >> a legal battle ensued and when the dust settled kathleen was saddled with $200,000 of debt from the brothers short time control of the business as well as legal fees from the fight. she also lost the kathleen's brand name. the only thing she walked away with was her bakery store front in south hampton. she had no choice but to start all over again. >> i had zero money left. in the bank. and i opened tate's in two weeks because i had to. >> along that time she was introduced to a business adviser for creative entrepreneurs. she told him the whole story and she was getting ready to sell her home for much needed capital to fund the new business.
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>> looked at her and i said do you have a bake shop, do you have a building. do you have a recipe. she said yes. i said you're not selling anything. roll up your sleeves and we'll make it happen. >> how does an entrepreneur form a successful partnership and avoid a misstep like kathleen? michael points out some simple things you can do, like keeping 51% of the company so you can have voting control and making sure you have veto power on important decisions written into your contract >> you're the founder, you're the visionary, they are coming to you. you don't need them they need you. oftentimes private capital comes in. there's this great vision, great idea, beautiful placement in the market and then all of a sudden they just want to make millions so they come in and totally destroy it and you lose your brand. >> with michael's guidance and the emotional chapter of kathleen's bake shop behind them tate's has catapulted to a
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bigger grand by focusing primarily on the cookie business. >> it's an all american story. grow up on the farm, bake cookies, you get knocked down and now you're back. >> the whole ordeal was worth it says kathleen and in many wags it's the best thing that could have happened. >> when you go through something very challenging that tests your limits, everything becomes easy. i don't have fear to take chance. what's the worse that could happen? i already lost everything before. >> can you imagine losing your business, even one with your name attached to it all because you chose the wrong business partner? how can you avoid this. we have a great panel to discuss this here today. brian cohen is here on the set with us. he's the chairman of new york angels a group that has invested more than $50 million in 70 early stage technology companies
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and the ceo of a launch dot public relations platform and guy okay with a guy kawaski and author of 12 books. good to see you guys. so, brian, you sitting on the set, we're both watching this story and just shaking our heads when she said that one-third, one-third, one-third. her adviser said it keep 51%. it's as easy as that, right? >> no, it's not. it really depends on the kind of business it is. i'm unusual because i married my partner and the best part of that is that she challenged me all the time and she was 50% and i was 50%. but we both went into it with that absolute trust. and that relationship that we had between us of challenging each other isn't normal in most business relationships as partners because they are always trying to figure each other out.
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i think the nature of the success of a great partnership is when you go into with it a rigor, a rigor you want to challenge each other. a rigor that says what can you add every day to the business. >> guy, you're in business with your wife, brian, i'm in business with my brother. i trust him. he me. if you're going into business with someone who you know well but not that well what can do you from text yourself? >> well, i think in many regards protection is somewhat of an illusion. it's all about doing the due diligence and doing the investigation and trusting your gut at the front end. it's much more difficult to undo a bad situation than to prevent the bad situation so it's about checking references. in this case the thought that three people would be equally worth one-third is simplistic. it's very unlikely those other
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two people were worth two times more than she was. it was her idea, it's her skill, her recipe, her name, it's her everything. hard to imagine it should have been one-third, one-third, one-third at the beginning under any circumstance. >> you know what i loved at the end where she said i'm not afraid any more. right? what's the worst that could happen? i lose everything i've already lost everything and that is a great attitude for an entrepreneur to have because chances you are going to lose everything. >> you could. you could. i'm more of an optimist so i could into it with the realization i'm adding value to my company. i'm calculating what is the person adding to what i'm doing. i don't think companies today particularly in the world i spend a lot of time can operate with one individual. there's so many pieces that's required. she had bad advice. she never stopped to consider the consequences of doing what she was doing. so certainly find the best
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lawyer. the one that understands early partnerships and relationships that can happen and psychology of that. but i am a believer in a team. i don't think any more, inasmuch my wife and i built our company together and she challenges me i don't think companies can be built without great partnerships. >> you mentioned it, guy, about trusting your gut. how do you know when to trust your gut. lots of times we have this last minute oh, i'm doing something wrong, i'm in too deep, i don't think i can change this. to be honest sometimes you shouldn't change it you're getting cold feet like just before you're getting married. how do you know when to give your gut credence and not to. >> this won't help kathleen but i've found what you should do is ask your wife, because my historical perspective -- >> thank you. >> -- your wife has much better judgment than you.
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this is good advice for men. i don't cho what to tell women when they are the ceo because i don't recommend they ask their husbands. >> when people ask me about my business i tell them i have a strong feminine side. >> so maybe people should just call-up brian and ask him. all right. thanks, guys. i'm glad this story has a happy ending because as you listen to the middle of it it's like a knife in your heart. she pulled through and those cookies are great. thanks so much. we just showed you the example of a partnership gone wrong. well now let's look at the opposite. free fraternity brothers who got together and struck the perfect balance. their success can be traced to their friendship and commitment to the community following the zafgs of hurricane sandy the owners kept the facility open 24 hours a day to house the displaced and act as a base for disaster response teams. as we report ad few years back
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these college buddies turned business partners have made the best of some tricky times and become a booming business. in the old days sports in new york city used to be of the classic variety. but times have changed. this is brooklyn boulders. 20,000 square feet of rock climbing in the heart of the borough. >> this is the only place in brooklyn. >> the facility is the work of fraternity brothers who turned business partners. going into business with your close friends may sound risky but these guys figured out how to make it work. >> this is the promotion we ran. >> they found that a clear division of responsibilities has helped them tack tell challenges of manage the start up, and avoid any personal drama. >> whenever the discussion gets
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a little fiery, we're always just like friend first. friends first. >> jeremy and steven, avid climbers wrote a proposal for a climbing gym. they went their separate ways after graduation but continued to pursue their idea. >> we have the capabilities so we figured out why not. >> from the start their roles have been define. jeremy works in finance in boston came up with projections and models and he and steven pitched the idea to their families. hen they brought on a third friend. >> do you want to be a part of this. we trust you. i said yes but i want equity. and so that's how i got into the mix. >> operations guy, can sell anyone anything. great at sales and marketing and pr. i'm the creative type. i can, you know, design and build.
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jeremy is the finance guy. with my vision, jeremy's capabilities and lance's execution the roles were so clearly define from the beginning. >> with funding and a management team in place steven took over the creative responsibilities. he searched around new york city for more than a year before securing a lease on a 100-year-old warehouse in brooklyn that used to house newspaper delivery trucks. now that brooklyn boulders is open for business lance manages the day-to-day operation while jeremy and steven continue in their roles behind the scene. >> i'm ready for every job. seeing all the jobs from all the angles makes me the perfect person to assign those jobs and, you know, make this place run like a well island machine. >> i have a very intimate knowledge of the numbers. that helps you figure out pretty quickly if there's something going wrong or not. >> while they are focused on their specific responsibilities within the business they have an eye on the big picture.
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>> when it comes to what will happen over the next five years, the three of us really have input. there's no major decision that's going to get done without the three of us being exactly on the same page. >> when we come back, seeking out investment capital. you may not be looking in the right places. and our panel discusses which mobile operating system is right for your business. we've all had those moments. when you lost the thing you can't believe you lost. when what you just bought, just broke. or when you have a little trouble a long way from home... as an american express cardmember you can expect some help. but what you might not expect, is you can get all this with a prepaid card.
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spends like cash. feels like membership. time now to answer some of your business questions. brian and guy are with us once again. the first one is about seeking advice or investors. >> a small start company which is cash flow positive that has an innovative product, what path that company should go to in order to get the professional advice from venture capital, from management companies. >> okay, guy you're in the heart of silicon valley. you're surrounded by people this guy would like to speak to. how do you get in? >> the most important way to get in these days is to have a working prototype or working service or product that people
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are already using. in the past you used to raise money in order to build the prototype. today with open source tools and cloud based servers and marketing using social media such as facebook and twitter the expectations are different. venture capital expects you to show up with something that's working not just a powerpoint presentation and a dream. the key is to have a working prototype that's in use. >> this guy has something it sound like, it's working. even if he's not looking for money, brian, how does he get advice? many times it's easier to ask people forced a vice than money. >> get the best lawyer in the business. the lawyers know the eco system. in new york city there's a handful of lawyers that do this every day. they see who is trustworthy, who has the money, what the system is that they have to go through, hire the best attorney you can find. >> is that easy? >> they are there. they are overwhelmed because
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there's so many companies. so you're kind of selling them too. they have to believe in you almost as if they are investing in you because some best attorneys will give you and entrepreneur rate because they believe in you. >> next up a question about mobile operating systems. >> what do you think the preferred solution will be in the future, ios, android or windows? >> any sense? >> that's a real visionary thing. i'm a big apple fan. as much as apple has been challenged. >> you're a focus group of one? >> i am. i'm an ios guy. i think apple will pull a rabbit out of its hat. google has a lot behind it with android. they have their challenges. they haven't standardized. i'm behind ios. >> guy? >> you may find this hard to believe being the apple alumni i don't use any ios devices i'm pure android. but i think you have to be on
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both platforms, an troid and ios. arguably you should do the one that you think your customers are using more but at the end of the day you have to do both. >> okay. probably not the answer he wanted to hear but one that is the reality. finally this is an e-mail from chris. he says i own an i.t. service company with myself as the only employee. how do i know when it's time to hire my first employee. we get this question a lot. when he's running out of time or not sleeping? >> anybody who asks that question at the time they need it have not been planning enough. they should have thought about it before they started their company. i think if it's in the service business how do they extend their service time because they are usually charging themselves out on an hourly basis. as soon as they see that happening and they need to extend their time they need to hire somebody to support them.
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once you get there, hilt the ask the show link to submit a question for the panel. again, that is openforum.com/yo openforum.com/yourbusiness. or e-mail us at yourbusiness@msnbc.com. brian and guy had some really helpful advice about how to improve your business. now let's get some great ideas from small business owners like you. >> we do a monthly company meeting where i sit with the employees, i show them the road map. we have a company discussion and now it's got more challenging as we've gotten up to 70 people. but it's a tradition that we kept since we were a handful of people. i think that really keeps staff engaged, excited. >> everything we watch the youtube video gangnam style, the lesson i learned from this video, to succeed in the
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business, you should be very unique. don't try to copy other's ideas. have your business based on your unique ideas and you're going to succeed. if you are unique, you can succeed like gangnam style. chances are your customers or potential customers are going to look for you online so here are five ways to build your credibility on the internet, courtesy of small biz trends.com. one, a great facebook business page. it's likely your customers are going to look for you on facebook. you'll also be able to use it to leverage the many social media benefits within the social media network. two, interviews and press. nothing helps your online credibility better than a third party endorsement, so seek out every media opportunity and be sure you have it posted online. three, a maxed-out linkedin profile. it's often one of the first things that comes up in an internet search.
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so make sure your profile is up to date with links and information. four, a blog. having a blog will help position you and your business as a leader in the field. and number five, videos. studies continue to show that video use is on the use, so make sure you have a video presence online. when we talk about capital for our businesses, we're generally talking about money, about funding. but our next guest says we should not forget about invisible capital. that there are hidden forces that can help to shape entrepreneurial opportunity. chris robb is an adjunct professor at temple university's fox school of business. we sat on a panel together and i was so interested in what you were talking about that i wanted to be sure to share it with them. so explain in a line or two, what is invisible capital? >> essentially invisible capital is all the things that impact business viability when hard work, a great idea and a good
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attitude are simply not enough. it's everything else. >> so there's money, but as you say there's your knowledge, there's skills, there's experience, there's traits and then of course the network, the people that you know. all of these are important to growing your business. >> absolutely. >> and so as we think about how to take advantage of these things and, look, i might say people that you know, sure, that works for you, you're at princeton, it works for me, i'm at msnbc, i might not know anyone, so how do we reframe our own invisible capital. you said one of the first things you think about is privilege. >> well, there are things that we benefit from that we had nothing to do with and other things that we should take great credit for. i didn't choose to be born into a middle class family that valued education and entrepreneurship, i was just lucky. but that helps me so i shouldn't feel ashamed about it, i should leverage it. that just makes sense. it helps being a man in a male-dominated industry or to speak english as a first language. all these things help. they're not enough, but they have to be used in a meaningful
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way. if we don't realize this, then we leave assets on the table. >> that's interesting. so being a male, it obviously is happening. you're a male in a male dominated industry, but you're saying taking a step back, recognizing that this is an asset actually changes the way you can use it? >> right. because otherwise they may be invisible to us, right? sometimes it takes someone else to realize the things that we already have, but they're hidden in plain sight. so, for instance, i don't think about my gender that much, but if you are a 19-year-old woman who wants to raise money to open up an auto repair shop, people are going to be looking at you, irrespective of what skills, knowledge, experiences you have because they make certain assumptions about you. that doesn't make these people bad people, but we live in a society where there's very few 19-year-old women starting auto repair shops. she has to recognize that that is the perception and she has to think ahead and say, well, how do i strategically leverage that i am not a man and think what other resources can i bring to bear to make this a reality.
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>> okay. then profile, how you're seen by others. >> absolutely. when i show up here, i want to look nice. if i project a professional image, the way i speak, how i comport myself. all those things matter. what matters even more is how you perceive me. i may think i'm very professional and when i walk off the set, you're like who's this guy? >> you know, when i was in business school, there was a class that was called touchy feely, it had a real name too but everyone called it touchy feely. the whole idea behind the class was learning how people perceive you. when i put something out into the world i may think that you're reacting to me in a certain way. but when you actually get in a group of people that are told to be honest about their reaction, it's interesting how you're perceived is not necessarily what you think. >> absolutely. that's a form of social capital which is a component of invisible capital which is not just who you know, but who knows you and what they think of you. >> and then finally, pride. >> well, what are you most proud of beyond your tech cam
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competency in your business, providing goods or services? separate from that, what do you do really well, really well? actually write that down and look at the lists of privilege, pride, profile and see what connections there are. >> thanks so much, chris, it was great to see you. >> my pleasure. well, we do a lot of communicating online. still nothing beats a face-to-face meeting when it comes to networking. our app of the week makes meeting up a little bit easier. the here on biz app alerts businesses when their linkedin contacts are physically nearby. after checking in with the free app at your next conference or trade show, you'll get a list of other users who have checked in as well. setting up a meeting place and time is easy using the built-in chat feature. to learn more about today's show just click on our website. it's openforum.com/yourbusiness. you'll find all of today's segments plus web exclusive